Kicking Hybrid Cars Out of the Fast Lane

California Stops Letting Solo Hybrid Drivers in the Carpool Lane, Boosting Other Technologies; Will Other States Follow?

By

Joseph B. White

July 13, 2011

Most things you buy don't call for research into whether shifting federal and state policies could hit the value of your purchase.

Fuel-efficient, advanced-technology vehicles are an exception.

ENLARGE

Interest in natural-gas-fueled cars such as this Civic is growing in California.
Honda

Some big states are looking to limit or scrap incentives encouraging the purchase of hybrid cars, and the federal government has already shifted on what technology garners tax credits. California, the nation's biggest car market, earlier this month stopped allowing single occupants to drive gasoline-electric hybrids in carpool lanes.

That perk had helped to sell thousands of Toyota Prius hybrids—and rival models from Honda Motor Co.HMC7.30%, Ford Motor Co.F-1.79% and others. In all, California issued some 85,000 yellow stickers giving hybrid-car owners the right to cruise "high occupancy vehicle" lanes in splendid isolation, while motorists in less advanced cars stewed in the slow lanes.

Now, Prius owners have rejoined the hoi polloi. In part because of California's HOV-lane incentive—as well as federal and state tax breaks—hybrid cars aren't exotic technology in California any more, says John Swanton, an air-pollution specialist at the California Air Resources Board.

"It's very hard to justify using that excess carpooling capacity for something that's so commonplace," he says.

Ms. Margolin, an accounting professor, says she recently changed jobs and cut her commute to about 10 miles from 50, but adds she will cut out tasks requiring long drives now that she has lost solo HOV-lane access. Ms. Margolin says her next car will be a plug-in Prius, which will qualify her for that access again, so long as she can get one of the limited number of stickers. Other club members are also looking at the plug-in Prius, though a few who have relatively short commutes have opted for an all-electric Nissan Leaf.

In January 2012, California will offer 40,000 permits allowing HOV-lane privileges to buyers of plug-in hybrids that can run at least 10 miles on batteries alone. That's good news for Toyota Motor Corp. and General Motors Co.GM-1.25% They both plan to have eligible plug-ins ready by early 2012 (GM's Chevy Volt plug-in doesn't qualify because its gasoline engine isn't clean-burning enough.)

But buyers beware: There could be a stampede for those 40,000 permits. Toyota says it has 29,000 people already signed up on a list of would-be plug-in Prius buyers.

The California HOV lane illustrates a challenge car makers and consumers face. Federal, state and local governments have widely varying incentives to encourage citizens to buy cars that use less petroleum. These incentives can appear or disappear more or less overnight, and many are structured to favor early adopters of new technology.

The federal government offered tax credits of up to $3,400 for buyers of hybrid cars, but those credits ran out after a manufacturer sold its 60,000th hybrid vehicle. Thus, people who bought Priuses after Sept. 30, 2007 didn't qualify. The credit expired for all car makers at the end of 2010.

ENLARGE

Brian Wynne, president of the Electric Drive Transportation Association, an industry association in Washington, D.C., says he doesn't see other states rushing to take away the HOV-lane privileges they offer. And lots of other incentives remain for people who want to buy alternative-technology vehicles, he says.

Many, such as free parking or access to charging stations for plug-ins, are offered at the local level. Some are offered by corporations, such as electric utilities that have a financial interest to shift fueling from gas pumps to the grid. Pacific Gas & Electric Co., for example, offers lower rates if plug-in owners charge their vehicles at off-peak, late-night hours.

Still, California's move is a reminder for consumers interested in alternative-fuel cars to undertake due diligence, especially if a particular perk, such as access to the HOV lane, is a deal breaker.

In Virginia, for example, the state says it allows hybrids in HOV lanes. But the fine print of the latest policy reveals that owners of hybrid-vehicles registered after July 1 aren't allowed to ride solo in the HOV lanes on some of the main routes into and out of Washington, D.C., one of the country's most congested metropolitan areas. Virginia's hybrid HOV-lane exemption is set to end June 30, 2012, unless the legislature extends it again.

New York State, one of the largest hybrid markets, says it is studying whether to continue offering HOV-lane privileges to hybrids.

California's decision to kick hybrids out of the HOV lanes is giving a boost to rival technologies, including natural-gas and all-electric cars, such as the Nissan Leaf.

Eric Bolstad, general manager of Scott Robinson Honda in Gardena, Calif., says more people are asking about Honda's long-overlooked compressed-natural-gas Civic since it became widely known that Priuses would no longer qualify for HOV-lane privileges. Mr. Bolstad owns a CNG-fueled Civic himself, driving 56 miles each way to and from work, with HOV-lane privileges he says make it possible to get home in as little as an hour.

In response, Honda plans by November to build about 240 natural gas Civics a month at a factory in Indiana—double the prior production rate for the car, says Eric Rosenberg, assistant manager in charge of marketing for the car.

The company plans to promote the model more heavily, expand to more than 200 the number of dealers that sell the car, and outfit CNG Civics with options such as navigation systems that had previously been omitted.

One problem for Messrs. Rosenberg and Bolstad is that Honda didn't see this policy-driven demand spike coming. Honda isn't launching the redesigned version of the CNG Civic until later this year. Right now Mr. Rosenberg says he has no new Civic Natural Gas models to sell and last year's models are virtually gone.

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